Bitcoin mining is a lot less profitable than 2 months ago

Bitcoin mining is a lot less profitable than before. There's 3 reasons for that:

  1. The increased difficulty factor, which means it takes longer to discover a winning hash that can be turned into a bitcoin
  2. The BTC/USD exchange rate, which dropped from 1:1 to 1:0.8.
  3. The USD/EUR exchange rate, which is slightly worse than before

Admittedly, point 3 was already a problem when I started mining a couple of weeks ago. I think that the current exchange rate is not a realistic measure of the value of money. If you can buy the same things for 1 USD as you can for 1 EUR, which I think you mostly can, then the exchange rate is unrealistic and can be abused. Companies abuse this by making us buy iPads for 500 EUR, which is 700 USD! Not very nice.

The biggest problem though, is the difficulty factor. Although the BTC/USD exchange rate is fluctuating, there seems to be enough demand for bitcoins to keep the trades going. But because the difficulty factor is self-adjusting (and impossible to circumvent!) it's going to get harder and harder for each individual to generate bitcoins as the bitcoin network increases in size. When I started mining the difficulty factor was around 38000. The next week it increased to 50000, and not much later it went up to ~76000. That basically means that it now takes twice as long until a valid hash is found, cutting the profit in half. And the more people join in, the lower the profit will get. The self-adjusting techno-beauty of the bitcoin system is a disaster for people who want to get rich quick.

I'm undecided as to whether I'll keep mining. I think I"ll continue until the next difficulty change, at least. If it lowers, then there might still be value in mining. Otherwise I might as well quit. Perhaps others will quit too and the difficulty will go down again. Nobody knows for sure. It's all just a big gamble. But the beauty of the bitcoin system is that, no matter how you try to use and abuse it, the system is immune to all attempts at tinkering with it. It is perhaps one of the best geek achievements yet.

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